Some nice lenders will cut the rate on your mortgage

Nation's Housing

July 30, 2000|By KENNETH HARNEY

THERE's A significant, consumer-friendly trend under way in the American home mortgage market that you shouldn't miss: a new combination of high-tech, high-touch service designed to coddle you, communicate with you, and cut your interest rate at every opportunity, as long as you pay on time.

What's so revolutionary about coddling good customers? It's been unusual in the mortgage industry ever since the neighborhood savings and loan association stopped functioning as the lender of choice for most homebuyers. Today's mortgage market is dominated by giant, impersonal institutions, cranking out tens of thousands of loans like so many jelly beans, and then communicating with customers mainly through monthly bills.

There's no incentive, no pitch for you as a steady-paying customer to stick with your original lender should you need a new loan or want to refinance. Frequently, your original lender also sells your loan - or the rights to "service" it - to another huge, computer-driven financial factory. If you have a question or a problem, you call an 800 number, and may have to struggle to finally talk with a live, knowledgeable human on the other end of the line.

Contrast that with the customer relations style of one of the leaders of the new move to high-touch, high-tech: Jim Riley heads a San Diego-based national mortgage banking firm whose business is booming at a time when much of the industry is down by 25 percent to 30 percent in new loan volume from the summer of 1999.

Riley's City Line Mortgage Corp. funds millions of dollars of new loans every month through a network of brokers in 27 states. But Riley offers far-flung borrowers some extra incentives: First and foremost, a guarantee to lower their interest rate at no charge anytime they want it, provided Fannie Mae's nationally posted rates drop three-eighths to one-half a percentage point below their current fixed or adjustable rate.

Customers needn't watch Fannie Mae's posted rates themselves. They just have to maintain on-time payment histories and be "gainfully employed." Every customer is segmented in City Line's computers according to their initial interest rate, along with an electronic snapshot of their full loan account. If you qualify and rates drop, you get an e-mail notice that you can lower your rate within days. Say you've got a 8.5 percent rate and the market slips to 8.125 percent. Your account file indicates you could benefit from a quick rate reduction, and City Line shoots out an e-mail asking whether you'd like it done.

City Line does not charge anything itself for the rate change refinance, absorbing all of the document preparation and other closing expenses that it can control. The only charges borrowers may encounter vary by their location: Title companies in some states discount "re-issue rate" title insurance policies more deeply than others. Borrowers may have to pay $400 or more for new title coverage. And lawyers in some areas - particularly in the Eastern states - tack on $200 to $250 for closing fees.

A second incentive in City Line's coddling package: "Connectedness."

Riley urges all customers to supply the firm e-mail addresses or to get e-mail service. Ninety-five percent of his customers do. That, in turn, allows customers to receive quick rate-change notices, and allows them to e-mail Riley himself or members of the staff, including his wife and son, both in the business.

Riley can name home loan borrowers "who I talk to at least once every month, sometimes more" over the status of interest rates. City Line encourages this sort of high-touch personal contact as a loyalty-building customer service. The company e-mails all new borrowers at least twice in the first month to make sure they're on board with the spirit of the relationship.

The strategy apparently works.

Riley estimates that well over 90 percent of his customers who opt for a no-cost rate-cut plan stay with the company rather than defect when rates drop in the marketplace. Riley may be in the vanguard of the high-touch, high-tech pack, but he's hardly the only lender adopting these techniques.

Some of the largest mortgage companies and banks have begun emphasizing "customer retention" through more personalized contact, 24-hour online access to mortgage account information, and low-cost rate-reductions. Countrywide Home Loans, for instance, offers an "eEasy Rate Reduction Plan" that allows qualified borrowers to lower their rate as often as once a month. Service Saver Financial LLC's "ArcLoan.com" automatic rate cut plan is available online, and a variety of lender clients of Milwaukee-based Customers Forever offer online rate-reduction programs for borrowers with good payment histories.

The upshot of all this for you? If you pay on time and are clearly a cream-puff quality customer, ask yourself: Is your lender giving you first-class service, including low-cost rate reductions? And if not, why not?

Kenneth R. Harney is a syndicated columnist. Send letters care of the Washington Post Writers Group, 1150 15th St. N.W. Washington D.C. 20071.

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